Traditional broadcast media companies have continued to use the same technologies and systems to broadcast television and radio programming to viewers for decades. New technologies such as the Internet and mobile telephones have allowed new companies to deliver programming content to their viewers more efficiently and allows them to sell advertising in new ways based upon new metrics such as demographics. Not only have these new technologies created new media outlets that are cheaper to utilize, but these new companies have also created efficient systems to deliver content without being constrained by the limitations faced by traditional broadcast media companies.
Recently, traditional broadcast media companies have made the transition from analog broadcasting to digital broadcasting and High Definition Television (HDTV). Now, traditional television stations are almost completely digital. Radio stations are mostly digital as well but still broadcast over analog radio waves. From a technology perspective, both types of media outlets can now be integrated with other outlets such as the Internet and mobile phones since they use the same video and audio file formats, for example MPEG-2 for video and MP3 for audio.
Advertising sales methods vary by media outlet and are more advanced on new technology platforms such as the Internet and mobile telephones. There is a huge gap in the sales capabilities between these new media outlets and traditional media outlets. For example, Internet advertising can sell different types of advertisements based upon several metrics such as content keywords, audience demographics, and number of viewers. However, traditional media outlets can only sell advertising based upon generic factors such as time of day, and are limited to showing one type of advertisement, namely video or audio advertisements that last a certain number of seconds during a programming break.
Another major dilemma facing traditional media broadcasters is the fact that no single product handles the entire process from sales to the final broadcast. Currently, several different vendors and products are designed to handle a specific piece of the work flow. For example, a typical station might use MediaOcean by Donovan Data Systems for sales, OSi-Traffic by Optimal Solutions, Inc. for scheduling, and ADC by Harris Corporation for playback automation and broadcasting. Station operators then have to export data in different formats from one piece of software to the next. This process is often error-prone due to differences in how each software application interprets the data. Some industry standards have been created for this purpose, but vendors don't often implement a standard the same way as other vendors.
It is common for audio and video standards to evolve quickly. As the standards change, the stations must purchase expensive modules to take advantage of the changes. The cost is further increased due to the need to purchase modules for each piece of software along the chain. This is an inconvenience to the station and is often cost-prohibitive to implement with modules often costing tens of thousands of dollars or more each. It is for this reason that not all stations can even take advantage of the latest technologies.
A major side effect of separate systems is that traditional media broadcasters aren't able to guarantee that an advertisement will appear when it is scheduled. Also, if an advertisement is not shown, the automation system typically does not have a way of communicating with the sales or accounting system to credit the advertiser or give the option of rescheduling the advertisement. The end result is that the station sells its inventory on a “best effort” basis and based on average success rates rather than accurate results.
Another side effect of separate systems is that broadcasters can only sell advertising and schedule programming 24 hours in advance. At the end of a typical work day, the schedule for the next day is finalized and exported to the automation system. There is no way to sell a last-minute advertising spot that might not have been sold before the scheduling deadline. As a result, stations miss potential revenue that could be made if they could sell more advertising.
The use of Digital Video Recorders (DVR's) has also contributed to the fall in revenue for stations. DVR's allow viewers to skip commercial advertisements with the touch of a button, and some are able to detect them and remove them from the recorded program automatically. Advertisers are looking to alternative media outlets such as the Internet to reach more viewers as well.
Another factor contributing to high operational costs is the lack of accounting systems that are designed for the broadcast business model. Media broadcasters are forced to use inadequate accounting features of sales and scheduling packages which do not support advanced billing and invoicing functionality. For example, in order to bill a client for anything other than a television commercial, a station operator must create a dummy commercial 1-second long and use that to invoice the client the proper amount. In the alternative, third-party accounting packages are used which have to be heavily customized to support a station's business model, and data has to be exported on a one-way basis from the station's operations systems into the accounting system.
The end result is that as other media outlets and technologies evolve, traditional media broadcasters are falling farther and farther behind due to the large expense in updating systems and the lack of integration between systems.